First infringement case could be ‘seminal moment’ for US cannabis sector

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28 January 2019

Sources at biotech companies and NPOs explain how the future enforceability of US cannabis patents in federal courts rests on whether UCANN v Pure Hemp is thrown out or not

The first infringement case for a cannabis-related patent could
be a make-or-break moment for the growing US marijuana industry, according to
sources at medical marijuana labs.

The case of United
Cannabis Corp (UCANN) v Pure Hemp Collective was filed over US patent
number 9,730,911 (the 911 patent)
for “cannabis extracts and methods of preparing and using same” in July 2018. A
conference hearing for this case was heard at the US District Court for the District
of Colorado in October 2018.

Sources say that many businesses in the industry are
concerned that the courts will throw the case out because marijuana is still
illegal on a federal level in the US, despite being legal for either medical or
recreational use in 33 states.

If the courts do throw the case out, it will mean that
marijuana patents registered at the United States Patent and Trademark Office
(USPTO) will become difficult or even impossible to enforce – unless cannabis
is later legalised on a federal level.

“This is a seminal moment for the industry, and we’re hoping
the case is not thrown out,” says Reggie Gaudino, vice president of IP at Steep
Hill Labs. “That would be a huge blow to the industry because there would be no
potential to protect innovation in the industry – at least until there is a
government turnaround.”

He adds that such an outcome could cause the industry to
stagnate if it repels investors who can no longer leverage inventions to profit
from their research and development spend.

Dale Hunt, legal counsel for the Open Cannabis Project adds:
“I do think that there will be some people waiting on the sides until federal
treatment of cannabis patents is a bit less dicey.”

Mowgli Holmes, chief scientific officer at Phylos Bioscience
agrees, and says: “Many people are making the assumption that patents are a
placeholder that will be viable once the substance is federally legal, but I do
not think anyone would make that mistake right now.”

But Steep Hill Labs’ Gaudino adds that, whichever way the
case is decided, the outcome will be an enormous boon for the sector.

“Deciding on the case one way or another would mean the
cannabis industry has a voice in the federal patent courts, despite being
federally illegal,” he says. “It means we have recourse, which would be good
for those businesses attempting to invalidate an overly broad or weak patent.”

As Patent Strategy reported
last week, the lack of cannabis prior art available to USPTO examiners - owing
the substance’s historic and current illegal status - has led to numerous
obvious or non-novel claims passing examination, which block innovation unfairly.

This situation has emerged because there are very few
restrictions on what can have patent protection in the US. There is no
prohibition on patenting a subject matter that is used for an illegal purpose
or with an illegal substance, including cannabis-related patents.

But enforcement of patent rights in the US is governed by
federal law, and it is uncertain whether or not cannabis patents can be
challenged or enforced because of the substance’s illegal status at a federal
level.

According to Clarivate
Analytics, more than 1,500 cannabis-related patents have been filed
at the USPTO since 2005 – which means many registrations stand to have their
protection powers diminished if UCANN v
Pure Hemp is thrown out.

High optimism

There is good reason for corporate confidence in the future
of cannabis patents, such as that indicated by key marijuana patent holder GW
Pharmaceuticals. “GW’s patents are specific to the use of cannabinoids in
therapeutic areas in which we have achieved novel innovations and we believe
they are both valid and enforceable,” a spokesperson at the company tells
Patent Strategy.

GW would not elaborate on the certainty of this statement, but
one reason might be that there is strong chance that UCANN v Pure Hemp will not be thrown out. On January 3 2019, an
inter partes review filed against GW Pharma and Otsuka Pharmaceuticals’ US patent
number 9,066,920 was ruled on by the USPTO’s Patent Trial and Appeal Board
(PTAB).

The PTAB ruled on the matter without touching on the illegal
status of cannabis, and sources suspect that the federal courts will take a
similar approach – partly because the federal courts have decided to hear the
case in the first place.

“I did not expect that a cannabis patent law suit would make
it before the courts the first time out,” notes Gaudino.

Another reason for corporate confidence in the future of
cannabis patents is that the drug may soon be legalised on a federal level,
which would completely remove any reason for federal enforcement.

“I do think it will be legal soon,” says Holmes at Phylos
Bioscience. “Large and modern countries such as Canada have legalised the drug
and the US has now made hemp federally legal. That changes everything. Full
legalisation is inevitable, no question,” he said.

Kevin McKernan, chief scientific officer at Medicinal Genomics, adds that he is not expecting legalisation to happen tomorrow but
that politicians will feel more and more pressured over time to legalise the
substance.

“This is bigger than any politician, and that is something
that most people understand,” he notes.

Hunt, legal counsel at the Open Cannabis Project, adds that
there is not only considerable financial momentum behind broad legalisation (legal
marijuana sales are expected to generate $25 billion by 2025) but moral
momentum as well.

He says that the health benefits of marijuana have propelled
legalisation supporters from a minority voice to a movement that most politicians
could not justify opposing.

The fate of cannabis patents and the marijuana industry hangs
in the balance, and will not be known until a ruling for UCANN v Pure Hemp is given or not. There is every chance that the
case will not be thrown out. If it is, marijuana companies must wait for
federal legalisation, which however, may be closer than some might think.